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The two levels of reforms

Padma Shri Dr Bibek Debroy is a man of many passions and his contributions to the nation in each of his chosen paths is nothing short of remarkable.

The two levels of reforms

Debroy currently dons two hats - the first and the most recent, as the chairman of Prime Minister’s Economic Advisory Council; the other as member of the NITI Aayog, which is the replacement of the Planning Commission and which acts as the government’s think-tank. 

Not just his lucid presentation on economic issues, but his deep insight into our history is admirable too. He has authored unabridged English translations of Indian Hindu epics, like Mahabharata, Valmiki Ramayana, Harivamsha and the Bhagavat Gita.

In a recent meeting with him at the Yojana Bhavan,  Debroy pointed to an excessive gloom and unnecessary pessimism on the part of certain segments on the state of the economy. 

 

On reforms

The economist referred to two levels of reforms: “at the first level are measures that need to tackle institutional changes. These call for a complete overhaul of systems and practices of the past seven decades. The pay off will not be instantaneous. In tackling this, citizens will also have a big role to play. 

“The second layer of reforms is structural. These relate to the supply side like improving efficiency of the transport sector, strengthening infrastructure, cleaning up stressed assets of banks and the like. Effectively tackling these would help accelerate economic growth.” 

The noted economist observed that such growth is related to the benchmarks set: “Focus on achieving incremental improvements would help ensure growth at 6.5 per cent; more focused supply-side improvements can take this to 7.5 per cent.”

 

On recapitalisation of PSU banks

In contrast to the frequent recapitalisation of public sector banks with  flourishing private sector banks like HDFC and ICICI, he was asked if dilution of government holding in the PSBs would be a lasting solution.  Debroy feels that the recapitalisation should not be viewed in isolation. “Time is not ripe now for offering a portion of equity of public sector banks to the public. With current low valuation, we cannot expect investors to subscribe to such equity offloaded. The immediate task is to improve the performance of PSBs, which, in turn, would enhance the value of their shares. The legacy of deficiencies needs to be pushed back before going for large scale reforms. The priority is to restore their health. The investor at this stage would rather support setting up a new bank and not an existing one with a heavy baggage!” 

 

On Indian agriculture

The low productivity levels of Indian agriculture, caused largely by the fragmented land holdings that average around two acres per capita and consequent lack of access to science, technology, mechanisation and management was pointed out. Will not attempt agglomeration of land holdings, permitting lease of land over 15 years without alienating ownership, as already done by several states like Punjab and Rajasthan, help? Debroy remarked that land being a subject falling under the jurisdiction of states, reforms of the agriculture sector are largely dependent on the initiatives of the states. - SV

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